What credit score do I need for a mortgage?

Key takeaways:

• There is no one figure that makes a good credit score. 

• Prep for your mortgage application by bolstering your credit history.

• Work with a mortgage broker who can help you compare offers and find the best deal for you.

• Be honest with lenders, always.

While buying a house is one of the most stressful things you can do, the process starts long before you work out your budget and talk to a mortgage broker. Building up a deposit and prepping your credit score for the mortgage process is just the start. 

Before you can take out a mortgage, lenders will want to see that you’re a responsible borrower. And that’s where having a good credit score comes in. So, what credit score do you need for a mortgage?

What credit scores are considered good?

There’s no exact figure you need in order to get a mortgage, as the score varies depending on the lender. However, it goes without saying that the better your score, the higher your chances of getting access to better mortgage rates. 

Each lender has a different definition of what is considered a ‘poor’, ‘fair’, ‘good’, and ‘excellent’ credit score. The scores from the top three financial institutions in the UK are below. While these agency scores are a great guide, every lender has their own criteria for deciding who to lend to. These ranges are set by the credit agencies themselves, not by Mojo or the mortgage lenders.

Equifax

In general, a good credit score on the Equifax range sits between 531 and above. A poor Equifax credit score sits below 438. 

View Equifax’s independent credit grading criteria (external site).

Experian

The Experian credit score is generally considered good from 861. The Experian credit score range now goes from 0 to 1250, which is up from 999.

View Experian’s independent credit grading criteria (external site).

TransUnion

TransUnion ranges from 0-710, with a good credit score ranging from 604-627. Scores of 628-710 are considered excellent.

View TransUnion’s independent credit grading criteria (external site).

What do the rankings mean?

• Poor - You have a chance of being approved for credit, but the process may be more complex, and you may face higher interest rates. 

• Fair - You should be offered reasonable interest rates, but are likely to have a low credit limit. 

• Good - You’re likely to be approved for credit, and should have access to a wide range of standard interest rates. 

• Excellent - You’re likely to be approved and have access to competitive mortgage offers.

How is credit score determined?

Mostly it comes down to your financial history, concerning how you’ve managed money and debt in the past. While many things can help your credit score (paying bills on time, for example), some behaviours can knock your score down a few points.

What can harm your credit score is:

• Missing payments

• Going over your credit limit

• Defaulting on credit agreements

• Making too many credit applications in a short space of time

• A history of bankruptcies, insolvencies, and County Court Judgments (CCJs)

• Joint accounts with someone with a bad credit record

• Errors or fraudulent activity on the credit report 

• Regularly withdrawing cash from your credit card

• Not being on the electoral roll

How can I improve my credit score ahead of a mortgage application?

Improving your credit score ahead of a mortgage application can improve your likelihood of success. But these things can take time, so do the prep work ahead of starting the mortgage application.

• Register to vote. The Electoral Register is often used for credit referencing and confirming identity. 

• Pay your bills on time. Payment history is one of the most important factors in a credit score. Set up reminders or direct debts to make sure you never miss a payment. 

• Pay down existing debts. This helps to lower your credit usage.

• Close any unused credit accounts (such as old credit cards). 

• Avoid maxing out your credit limit. If you have a balance of £500 on your credit card and a limit of £1,000, then you have a credit utilisation ratio of 50%. A lower credit utilisation number is preferred as it shows you’re not using most of your available credit. 

• Avoid applying for too much credit. Each time you apply, a hard inquiry is made, which can temporarily lower your credit score. Arrange for other applications (such as a new car loan or taking out a new credit card) for another time.

• If you have no credit, take out credit-building credit cards to prove you can handle credit.

• Check your credit report for errors. 

Check out a few more (25, to be specific) ways to improve your credit score.

How do lenders make their decisions on mortgage affordability?

Not all lenders have the same requirements, and they may have different ways of making their decisions. That said, most will look at the following factors:

• Information on your credit report (including your credit history and public record data)

• Your application form

• Information they may already have about you, such as if you have a bank account with them

• Their own lending policy, which may be different from those of other lenders

Looking at your credit report will show details on your credit history, such as how much you owe on credit cards, if you’ve missed payments in the past, and if you’re registered to vote. 

Mortgage lenders will then consider your mortgage affordability. They want to see if you can afford your mortgage before they lend you the money (and be less of a risk). So, they’ll look at your income, expenses (such as fixed costs like council tax, subscriptions, childcare, and other monthly outgoings).

It helps to show lenders that you could afford your monthly mortgage payments even if the interest rates went up or your life situation changed (eg, you decided to have children). 

Does a mortgage in principle affect my credit score?

A mortgage in principle (sometimes called a decision or agreement in principle) is a quick indication from lenders of how much they can lend you. It’s a level up from mortgage calculators as it’s more tailored to you. And from most brokers and banks, a mortgage in principle is completely free and won’t affect your credit score. They use a soft credit check which doesn’t leave an imprint.

Speak to a mortgage broker

Have a tricky credit score? Need some guidance when looking for mortgages? Chat to the Mortgage Experts at Mojo. You get support every step of the way, and we make it easy to get a mortgage with free advice and access to thousands of deals. 

And, when you have a slightly unusual financial picture (even if it’s temporary), having trusted advice can help you narrow down the deals for a successful mortgage application. Get started with a call with one of our experts.